Here Are 3 Big Keys That Will Impact Major Markets

From Art Cashin: Minutes And Ryan Help Cause Bulls To Cancel Picnic – U.S. stocks spiked on the opening and almost instantly kicked into overdrive, causing stocks to soar to the day’s high in the first hour of trading.

A key factor in the opening rally was the huge jump in the ADP estimates of payrolls.

Recently, there has been a lot of talk about hard numbers and soft numbers. In today’s sense soft numbers tend to refer to things like attitude measures. These have mostly gained since the election presumably buoyed by optimism around an “implemented” Trump agenda (tax reform, deregulation, stimulus, etc.)

The hard numbers are usually actual measures of economic activity.

So, the first thing that would help the bulls in terms of the agenda would be legislative movement and success. Passing some portion of the agenda could be a booster rocket for the stock market.

Short of legislative movement, the bulls would benefit if the hard numbers began to improve along with the soft numbers. That would suggest that people/business are upping their activity in line with their more upbeat hopes and outlooks. Thus, if you think the agenda will help you, your preparations to position yourself helps bring some of the agenda benefits even before the agenda passes.

If you are still awake, that’s kind of what happened Wednesday morning. The knockout numbers from ADP hinted that some companies might be hiring as they assume activity will kick in shortly as the agenda moves.

Anyway, the opening rally hit the day’s high just at the 10:30 release of the crude inventory. The inventories were higher than expected, which crimped the oil rally, which took some of the oomph out of the stock market. Prices pulled back a bit over the next hour.

From about 11:30 on, stocks ticked rather indifferently higher but never got back to the post-opening highs. Then, at 2:00 the FOMC Minutes were released. Three things popped off the page:

1. Most don’t see any fiscal stimulus till 2018.

2. Several saw equity prices as quite high relative to standard valuation measures.

3. Several thought they should start reducing their balance sheet (remember “tapering”).

Bids began to cancel and stock prices pulled back as traders sensed that the punchbowl was about to be moved.

Then Speaker Ryan raised the anxiety level smartly by declaring that the House, the Senate and the White House were nowhere near on the same page on tax reform and that it could take longer than expected. That key hit to the agenda accelerated the selling.

Wave after wave of sell programs (ETF based?) helped take stocks into negative territory. A very disappointing reversal.